Trojan Technologies Delivers Increases In Revenue And
Earnings
LONDON, ONTARIO--
Company revenues and gross profit figures continue to strengthen
Trojan Technologies Inc. (TSE/TUV) today announced its financial
and operating results for the nine-month period ended May 31,
2001.
"I am very pleased to report that during the third quarter, our
financial performance continued to improve", said Hank Vander
Laan, President and Chief Executive Officer of Trojan Technologies
Inc. "Earnings before interest, taxes, and amortization for the
period reached $1.5 million and net income before taxes was
$300,000."
Highlights included:
Gross margins at 40% for the quarter: Consolidated gross margin
for the quarter increased to 39.8% or $8.3 million from 27.8% or
$5.0 million in the same quarter last year. Revenue for the
quarter and nine-month period increased by 16.1% and 14.6%
respectively over the same period of fiscal 2000.
Continued earnings improvement: For the quarter, earnings before
interest taxes, amortization and income from equity investment
were $1.5 million compared to a loss of $1.3 million in the same
quarter last year. In the third quarter, the Company earned
$306,100 before taxes, compared to a loss last year of $2.9
million. On a year-to-date basis, earnings before interest, taxes,
amortization and income from equity investment amounted to $1.6
million compared to a loss of $5.9 million in fiscal 2000.
Largest order in industry history: During the quarter, we
announced contract awards valued at over $20 million in the
Company's wastewater disinfection market. A major portion of these
awards included a large project for the Jefferson County
Commission - Environmental Services Department in Alabama, USA,
valued at over $15 million - the largest UV project in the
industry's history.
Significant interest in Trojan UVSwift(TM): Interest in our
municipal drinking water disinfection system, Trojan UVSwift(TM),
remains high. Since our product was introduced one year ago,
quotes worth over $170 million have been submitted for
approximately 245 projects that are considering the use of UV
disinfection technology.
Completed bank refinancing: During the quarter, the Company
completed its previously announced new credit facility with
Scotiabank that included converting $4.4 million of short-term
indebtedness to a term loan.
"We expect that revenue levels in the final quarter of this fiscal
year will allow us to maintain our improved financial
performance", concluded Hank Vander Laan, President and Chief
Executive Officer of Trojan Technologies Inc. "Significant
developments in both drinking water and wastewater treatment
markets in this current fiscal year have established momentum for
stronger growth in fiscal years 2002 and beyond."
More details about Trojan Technologies' financial performance are
contained in the following Report to Shareholders.
Report to Shareholders for the Third Quarter of Fiscal 2001
President's Message
To Our Shareholders
I am very pleased to report that, during the third quarter, our
financial performance continued to improve. Earnings before
interest, taxes and amortization for the period reached $1.5
million and net income before taxes was $300,000. While we
recognize there is still more work to do, I am encouraged that we
have met our targets to return our operations to profitability.
Revenue for the quarter and for the nine-months increased by 16.1%
and 14.6% respectively over the same period of fiscal 2000.
Earnings per share have also improved from a loss of $0.43 to a
loss of $0.10 per share.
During the quarter, we announced contract awards valued at over
$20 million in the Company's wastewater disinfection market. A
major portion of these awards included a large project for the
Jefferson County Commission - Environmental Services Department in
Alabama, USA, valued at over $15 million - the largest ultraviolet
(UV) project in the industry's history. Aftermarket sales and
service revenues increased significantly during the quarter
reflecting the benefits of two business initiatives. Having
invested time and resources over the last year to ensure the
reliability of our products, we are now better able to sell
aftermarket parts and service to our customers as opposed to
providing these components under warranty. In addition, our large
base of installed systems provides an attractive opportunity to
offer aftermarket sales and service and we have dedicated a small
team to actively pursue this opportunity. Early results are
encouraging.
During the quarter, we witnessed another drinking water
contamination crisis in North Battleford, Saskatchewan, when
Cryptosporidium was discovered in the municipal drinking water
supply. This incident, coming one year after the E.coli outbreak
in Walkerton, Ontario, has clearly heightened the awareness and
need for drinking water standards and more sophisticated
disinfection strategies. We anticipate the US EPA will introduce
proposed regulations later this summer that will encourage over
5,000 municipalities to implement a multi-barrier disinfection
strategy within the next 5 years. Ultraviolet disinfection will be
recognized as an acceptable treatment within this multi-barrier
approach. We also welcome the stricter water treatment legislation
recently introduced in the province of Quebec requiring
approximately 4,500 municipalities to filter and disinfect public
water supplies.
Our Trojan UVSwift(TM) product, introduced last year, is well
positioned to meet the needs of municipalities in implementing
their new disinfection strategies in response to new regulations.
The product was designed to be retrofitted into existing
facilities, thus minimizing the capital cost to the municipality.
We believe that the cost of the equipment, less than $100,000 for
each of the Canadian municipalities noted, will be very
competitive in the marketplace. Interest in our municipal drinking
water disinfection system, Trojan UVSwift(TM), remains high. Since
our product was introduced one year ago, quotes worth over $170
million have been submitted for approximately 245 projects that
are considering the use of UV disinfection technology. We expect
new revenues from this potentially large market to emerge in
fiscal 2002 and beyond.
During the quarter, we were very pleased to have been selected by
the PWN Water Supply Company of North-Holland, a recognized leader
in water treatment and supply, to collaborate in the research,
design, optimisation and installation of UV treatment systems that
will destroy organic micropollutants, such as herbicides and
pesticides, from drinking water supplies. This research, in
addition to our previously announced purchase of Advanced
Ultraviolet Solutions (AUVS), will, over the longer term, develop
a new market opportunity for UV and Trojan Technologies in the
Environmental Contaminant Treatment market.
Outlook
Our third quarter results reflect the improvements that committed
Trojan staff have made to your Company's operations over the last
18 months. We continue to work to improve our performance - both
for our customers and our shareholders. We maintain our commitment
to reducing costs, improving quality and delivering superior
customer service in a profitable manner.
We expect that revenue levels in the final quarter of this fiscal
year will allow us to maintain our improved financial performance.
Significant developments in both drinking water and wastewater
treatment markets in this current fiscal year have established
momentum for stronger growth in fiscal years 2002 and beyond. We
will continue to manage our business prudently with a view to
growing returns on investment.
(Signed)
H.J. (Hank) Vander Laan
President and Chief Executive Officer
June 28, 2001
Financial Analysis of Results
For the nine months ended May 31, 2001, revenues grew 14.6% from
$47.3 million in the prior year to $54.2 million. Revenue for the
quarter was $20.9 million; an increase of 16.1% compared to $18.0
million in the third quarter of fiscal 2000. On a year-to-date
basis, earnings before interest, taxes, amortization and income
from equity investment amounted to $1.6 million compared to a loss
of $5.9 million in fiscal 2000. For the quarter, earnings were
$1.5 million compared to a loss of $1.3 million in the same
quarter last year.
In the third quarter, the Company earned $306,100 before taxes,
but a net loss after tax of $193,900 compared to a $1.6 million
loss after tax in the same quarter last year. On May 9, 2001 the
Ontario Government budget was delivered and provided details on
the implementation of proposed reductions in income tax rates.
These reductions have the impact of reducing the value of the
Company's future tax assets recorded on the balance sheet. The
impact of the reduction in future tax rates is $400,000 and has
been included in the tax expense for the current quarter. On a per
share basis, the Company reported a loss of $0.01 compared to a
loss of $0.09 last year.
For the nine-month period, the net loss after tax was $1.7 million
as compared to a loss of $7.4 million in the prior year. On a per
share basis, the Company reported a net loss per share of $0.10
compared to $0.43 per share in last fiscal year. Note that last
year's results included a restructuring charge of $2.9 million
before tax.
Analysis by Product
Revenues from the Municipal wastewater increased in the quarter by
8.9% to $18.7 million from $17.1 million. Sales of aftermarket
parts and service were particularly strong during the quarter
exceeding $3 million, a 32% increase over the prior year. On a
year-to-date basis, revenue from the Municipal wastewater segment
grew by 9.2% to $47.5 million compared to $43.5 million for the
same nine-month period last year.
Revenue from the Clean Water market, including industrial,
commercial and residential products experienced significant
growth, increasing to $2.2 million from $0.9 million in the
previous year's quarter. During the third quarter of last year,
the Company introduced two new products to this market, Trojan
UVLogic(TM) and Trojan UVMax(TM). This year's results are
encouraging as they reflect the increasing market acceptance of
these new products. Revenue from the Clean Water market for the
nine months increased to $6.7 million, up 76% from $3.8 million
for the same period in fiscal 2000.
Gross Margin
Consolidated gross margin for the quarter increased to 39.8% or
$8.3 million from 27.8% or $5.0 million in the same quarter last
year. Consolidated gross margin for the nine-month period
increased to 37.5% or $20.3 million compared to 26.8% or $12.7
million in the prior year. These results reflect the benefit from
the Company's focus on improving operations together with the
benefit of increased production levels.
Operating Expenses
Operating expenses, specifically administrative, selling and net
research and development costs, increased slightly over the third
quarter of fiscal 2000 from $6.3 million or 34.9% of sales to $6.8
million or 32.7% of sales. Sales commission expenses increased by
$566,000 reflecting increased revenue and profitability (sales
commissions are variable based on the gross margin achieved on
projects).
On a year-to-date basis, operating expenses were $18.7 million or
34.6% of sales as compared to $18.6 million or 39.3% of sales in
fiscal 2000.
Liquidity and Capital Resources
During the quarter the Company further reduced its short-term bank
indebtedness to $15.4 million from $21.3 million at August
31,2000. Further reductions in accrued revenue on contracts in
progress were achieved by negotiating progress payments on large
projects that has the effect of improving the Company's cash flow.
Cash generated from operations during the quarter was $1.8 million
and $5.6 million for the year to date. During the quarter, the
Company completed its previously announced new credit facility
with Scotiabank that included converting $4.4 million of
short-term indebtedness to a term loan.
A conference call will be held for investors, analysts and media
at 2:00pm EST on June 28, 2001. The conference call will be hosted
by H.J.(Hank) Vander Laan, President and CEO and will include
Douglas Alexander, CFO and Marvin DeVries, COO. The phone number
to call is (416) 695-5801 or (800) 478-9326. A taped version of
the call will be available until midnight July 5th by calling
(416) 695-5800 or (800) 408-3053 and dialing passcode number
806114.
Trojan Technologies is a Canadian based, high technology
environmental company operating internationally. With more than 20
years of experience, Trojan has the largest installed base of UV
disinfection systems operating around the world. Trojan designs,
manufactures and sells ultraviolet disinfection systems for
municipal wastewater, drinking water systems for residential,
municipal and commercial use, and industrial systems for food and
beverage, pharmaceutical, and semiconductor applications. Trojan
recently entered the environmental contaminant and micropollutant
destruction market.
This document contains certain statements that are forward-looking
relative to the Company's future strategy and performance. They
involve known and unknown risks and uncertainties that may cause
the Company's actual results in future periods to be materially
different from any future performance suggested in this document.
Further, the Company operates in an industry where it may be
influenced by economic and other factors beyond the Company's
control.
/T/
TROJAN TECHNOLOGIES INC.
FINANCIAL HIGHLIGHTS
(in thousands of dollars)
(unaudited) For the nine months ended
-------------------------
May 31 May 31
2001 2000
-----------------------------------------------------------------
Revenue $54,241.6 $47,311.7
Earnings (loss) before interest,
taxes, amortization, equity income
and restructuring charge $1,579.0 $(5,918.3)
Net loss $(1,665.1) $(7,444.5)
Loss per share (in dollars)
Basic $(0.10) $(0.43)
Fully diluted $(0.10) $(0.43)
Number of shares
Basic 17,168.4 17,157.5
Fully diluted 17,799.0 17,755.1
TROJAN TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars)
(unaudited)
For the nine months ended For the three months ended
--------------------------------------- --------------------------
May 31 May 31 May 31 May 31
2001 2000 2001 2000
-------------------------- ----------------------
REVENUE $54,241.6 $47,311.7 $20,903.7 $18,012.2
Cost of goods
sold 33,913.7 34,616.3 12,585.2 12,996.5
-------------------------- ----------------------
Gross Margin 20,327.9 12,695.4 8,318.5 5,015.7
-------------------------- ----------------------
EXPENSES
Administrative and
selling expenses 16,011.8 13,478.9 5,888.5 4,673.2
Research and
development 2,737.1 5,134.8 945.3 1,611.0
-------------------------- ----------------------
18,748.9 18,613.7 6,833.8 6,284.2
-------------------------- ----------------------
Earnings (loss) before
interest, taxes,
amortization, income
from equity investment
and restructuring
charge 1,579.0 (5,918.3) 1,484.7 (1,268.5)
Other expenses (income)
Interest on long-term
debt 223.0 310.8 92.8 97.1
Interest and bank
charges 1,162.0 1,222.9 362.6 469.2
Amortization 2,363.6 2,663.9 826.4 913.8
Interest income (64.5) (176.4) (3.2) (23.2)
Income from equity
investment (490.0) (450.0) (100.0) (150.0)
Restructuring charge - 2,855.0 - 355.0
-------------------------- ----------------------
Operating income
(loss) (1,615.1)(12,344.5) 306.1 (2,930.4)
Income taxes - current 96.0 - 11.0 -
Income taxes - future (46.0) (4,900.0) 489.0 (1,300.0)
-------------------------- ----------------------
Net loss (1,665.1) (7,444.5) (193.9) (1,630.4)
Retained earnings,
beginning of period 3,190.1 10,907.7 1,718.9 5,093.6
-------------------------- ----------------------
Retained earnings,
end of period $1,525.0 $3,463.2 $1,525.0 $3,463.2
-------------------------- ----------------------
-------------------------- ----------------------
Loss per share
(in dollars)
Basic (0.10) (0.43) (0.01) (0.09)
Fully diluted (0.10) (0.43) (0.01) (0.09)
Number of shares
(in thousands)
Basic 17,168.4 17,157.5 17,168.4 17,168.4
Fully diluted 17,799.0 17,755.1 17,797.8 17,833.6
-------------------------- ----------------------
-------------------------- ----------------------
See accompanying notes
TROJAN TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(unaudited)
May 31 August 31
2001 2000
-------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,509.1 $ 718.0
Accounts receivable 26,183.5 23,943.6
Accrued revenue on contracts
in progress 8,694.8 16,289.7
Inventory 11,922.7 12,283.2
Prepaid expenses 287.5 394.0
Income taxes receivable 676.3 950.4
-------------------------------------------------------------------
Total current assets 49,273.9 54,578.9
Investments in other companies 2,236.9 1,746.9
Investment tax credits recoverable 4,378.0 3,178.0
Future income taxes 3,196.9 2,922.0
Capital assets 22,877.6 23,722.7
Patents, trademarks and licenses 1,294.2 1,305.8
Goodwill 1,634.5 782.2
-------------------------------------------------------------------
$ 84,892.0 $ 88,236.5
-------------------------------------------------------------------
-------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 15,355.4 $ 21,347.8
Accounts payable and accrued
charges 15,633.2 15,127.2
Current portion of long-term debt 1,440.0 915.0
-------------------------------------------------------------------
Total current liabilities 32,428.6 37,390.0
-------------------------------------------------------------------
Long-term debt 7,580.9 4,298.9
-------------------------------------------------------------------
Shareholders' equity
Share capital 43,357.5 43,357.5
Retained earnings 1,525.0 3,190.1
-------------------------------------------------------------------
44,882.5 46,547.6
-------------------------------------------------------------------
$ 84,892.0 $ 88,236.5
-------------------------------------------------------------------
-------------------------------------------------------------------
See accompanying notes
TROJAN TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited) For the nine months ended For the three months ended
------------------------- --------------------------
May 31 May 31 May 31 May 31
2001 2000 2001 2000
-------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss $ (1,665.1) $ (7,444.5) $ (193.9) $ (1,630.4)
Add (deduct)
charges (credits)
to operations
not involving cash
Amortization 2,363.6 2,663.9 826.4 913.8
Income from equity
investment (490.0) (450.0) (100.0) (150.0)
Future income
taxes (46.0) (4,900.0) 489.0 (1,300.0)
Investment tax
credits
recoverable (1,200.0) (600.0) (890.0) (600.0)
Write-off of
patents,
trademarks
and licenses - 651.3 - 651.3
Net change in
non-cash working
capital balances
related to
operations 6,613.9 7,911.1 1,647.8 934.4
-------------------------------------------------------------------
Cash provided by
(used in) operating
activities 5,576.4 (2,168.2) 1,779.3 (1,180.9)
-------------------------------------------------------------------
INVESTMENT ACTIVITIES
Additions to capital
assets, net (1,158.4) (3,596.9) (209.1) (461.6)
Additions to
patents,
trademarks
and licenses (195.5) (427.4) (73.7) (71.4)
Dividend received
from equity investment - 343.0 - -
Acquisitions (998.1) (149.5) (882.9) -
-------------------------------------------------------------------
Cash used in
investment
activities (2,352.1) (3,830.8) (1,165.8) (533.0)
-------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease)
in bank
indebtedness (6,208.9) (5,298.6) (4,394.1) 2,169.6
Issuance of common
shares - 348.5 - -
Advances of
long-term debt 4,693.0 - 4,693.0 -
Repayment of
long-term debt (917.3) (1,036.5) (557.4) (455.7)
-------------------------------------------------------------------
Cash provided by
(used in) financing
activities (2,433.2) (5,986.6) (258.5) 1,713.9
-------------------------------------------------------------------
Net increase
(decrease) in
cash and cash
equivalents during
the period 791.1 (11,985.6) 355.0 -
Cash and cash
equivalents,
beginning of
period 718.0 11,985.6 1,154.1 -
-------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 1,509.1 $ - $ 1,509.1 $ -
-------------------------------------------------------------------
-------------------------------------------------------------------
See accompanying notes
/T/
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with accounting
principles generally accepted in Canada. These unaudited
condensed notes to the consolidated financial statements should be
read in conjunction with the audited financial statements and
notes included in the Company's Annual Report for the fiscal year
ended August 31, 2000.
2. INCOME TAXES
At May 31, 2001, the Company has approximately $10,000,000 of
federal and $16,800,000 of Ontario non-capital losses that will
expire in 2006 through to 2008. The Company also has undeducted
Scientific Research and Experimental Development deductions of
$5.4 million that have no expiry date. For financial reporting
purposes, a future tax asset has been recorded in respect of these
losses carrying forward. As a result of the future tax rate
reductions tabled on May 9, 2001 in the Ontario budget, the
Company has reduced the value of this asset by approximately
$400,000 for the quarter.
3. ACQUISITION
In March 2001, the Company acquired the assets of Advanced
Ultraviolet Solutions (AUVS) of Tucson, Arizona. The purchase
agreement consists of an upfront payment of US$500,000 with
milestone and earn-out payments based on revenue generation and
profitability over the next ten years. The purchase price and
related costs have been classified as goodwill and will be
amortized straight-line over 10 years.
4. SEGMENT INFORMATION [in thousands of dollars]
Nine months ended May 31, 2001
/T/
-------------------------------------------------------------------
Municipal Clean Water All Other Total
$ $ $ $
-------------------------------------------------------------------
Sales 47,498.2 6,743.4 - 54,241.6
-------------------------------------------------------------------
Operating loss (160.8) (623.8) (830.5) (1,615.1)
-------------------------------------------------------------------
Nine months ended May 31, 2000
-------------------------------------------------------------------
Municipal Clean Water All Other Total
$ $ $ $
-------------------------------------------------------------------
Sales 43,481.5 3,830.2 - 47,311.7
-------------------------------------------------------------------
Operating loss (8,041.7) (232.9) (4,069.9) (12,344.5)
-------------------------------------------------------------------
Three months ended May 31, 2001
-------------------------------------------------------------------
Municipal Clean Water All Other Total
$ $ $ $
-------------------------------------------------------------------
Sales 18,663.3 2,240.4 - 20,903.7
-------------------------------------------------------------------
Operating income
(loss) 862.5 (204.2) (352.2) 306.1
-------------------------------------------------------------------
Three months ended May 31, 2000
-------------------------------------------------------------------
Municipal Clean Water All Other Total
$ $ $ $
-------------------------------------------------------------------
Sales 17,136.9 875.3 - 18,012.2
-------------------------------------------------------------------
Operating loss (1,568.4) (479.1) (882.9) (2,930.4)
-------------------------------------------------------------------
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Trojan Technologies Inc.
Douglas Alexander
Chief Financial Officer
(519) 457-3400
www.trojanuv.com
or
Trojan Technologies Inc.
Diana Cunningham
Manager, Corporate Communications & Investor Relations
(519) 457-3400
www.trojanuv.com |
